Optimal Pricing for Services of Iran’s Internet Exchange Points: A Fuzzy Geometric Programming Approach

The optimal pricing of goods and services is one of the most challenging issues in economics. Scarcity of resources which causes a good or a service priced more expensive, on the one hand, and its costs of production on the other, motivate researchers to find optimum price. This paper investigates an optimal pricing scheme for Iran’s IXPs services including 1Ge ports, 10GE, and 100GE ports through a Fuzzy Geometric Programming model. “Internet exchange points” (IXPs) are infrastructures through which Autonomous Systems (AS) such as Internet Service Providers (ISPs), Content Delivery Networks (CDNs), Content Providers (CPs), and other internet networks, peer with each other to exchange internet traffic more efficiently. These points provide their members with a wide variety of services. How should these services be priced so that the maximum number of potential members can be connected to IXP and also the profit of IXP is maximized? The FGP model answers these questions. According to the results of this paper, the demand for the services of IXPs is a function of the price of ports and the number of services provided in each IXP. This demand function is normal; i.e., the quantity demanded has a negative relationship with the port price and a positive relationship with the number of services. The demand function for 1GE ports is price inelastic, while the elasticities of the price for 10GE and 100GE is greater than 1. Also, it has been shown that the optimal price of the Iranian IXP services based on the FGP model proposes a higher price of 10.3% compared to its current price, and a lower price for 10GE and 100GE ports of 1.75% and 14.5% respectively compared to the current price. The sensitivity analysis shows that the changes of price elasticity up to 90%, have no impact on the profit of IXP, but it has a small effect on the optimum price.